First Thing Today: Quiet price action overnight
High stakes for Biden, Pelosi on BIF... President Joe Biden delayed his trip to Rome to go again to Capitol Hill to get a vote on the bipartisan infrastructure measure (BIF). The Washington Post reports Biden will announce this morning a framework on a social and climate change spending (BBB) package that would garner the support of all Democrats. The situation is high stakes for Biden and House Speaker Nancy Pelosi (D-Calif.) because progressives refuse to back the BIF until the complex and still unsettled BBB is finalized, a process that could take days or even weeks. Pelosi has called for the House Rules Committee to meet today and unveil some text of the still unfinished reconciliation package. The self-imposed deadline for voting for the BIF package is Oct. 31; that is when funding for some transportation programs also expires. Bottom line: An estimated six or seven Republicans are expected to vote for the BIF, so Pelosi’s margin is around 10 votes.
Shift in funding source for BBB... The funding mechanism for the BBB package is no longer a wealth income tax but instead a surtax on wealthy Americans. Under the plan, wealthy Americans will pay an additional 5% tax on income over $10 million, and another 3% on top of that on aggregate gross income over $25 million. The billionaire income tax faced opposition from several Democrats, including Sen. Joe Manchin (D-W.Va.). Democrats also appear to be in consensus mode regarding imposing a 15% corporate minimum tax rate. If so, the two programs could go a long way toward funding the around $1.8 trillion BBB package.
Russia trims grain crop estimate... Russia’s ag minister expects the country’s 2021 grain crop to total around 123 MMT after drying and cleaning. Previously, he said Russia’s grain output would be 127.4 MMT. As of Oct. 27, Russia had harvested 119 MMT of grain before drying and cleaning. Farmers had sown 17.6 million hectares to winter grains for harvest next year, down from 18.3 million hectares at the same point last year. The ag minister expects winter grain seedings to total 19.5 million hectares. Dryness in areas of Russia and Ukraine could reduce the area sown to winter grains.
Weekly Export Sales Report out this morning… For the week ended Oct 21, traders expect:
|
|
2021-22 (in MT) |
Last week |
|
Corn |
800,000-1,300,000 |
1,273,146 |
|
Wheat |
200,000-550,000 |
362,374 |
|
Soybeans |
1,250,000-2,000,000 |
2,878,404 |
|
Soymeal |
150,000-375,000 |
240,380 |
|
Soyoil |
0-20,000 |
3,001 |
U.S. Q3 GDP out later this morning... Data for the third quarter is expected to show the slowest growth pace since the second quarter of 2020, when the economy contracted sharply amid Covid restrictions. According to a Reuters survey of economists, the economy likely grew at a 2.7% annualized rate in the third quarter. That would be a step-down from the 6.7% rate notched in the second quarter.
China sets target coal price in bid to ease power crunch... Reuters reports China’s state planner wants to cap ex-mine pit prices for 5,500 kilocalorie thermal coal at 1,200 yuan ($187.56) per metric ton, according to sources, well below the 1,450-1,900 yuan per metric ton price cited by traders on Wednesday in top coal producing regions of Inner Mongolia and Shanxi. However, 1,200 yuan per metric ton level would still be above the breakeven rate for power generators, which analysts estimated at between 600 and 1,000 yuan, depending on the region. Chinese coal futures slumped again on Thursday and have nearly halved from a record high on Oct. 19.
Chinese pork prices continue to fall... China’s average pork price in 16 provincial regions fell 15% in September and was down 61.8% versus year-ago, according to ag ministry data. Chinese domestic pork and hog prices continue to fall amid increased supplies and a decline in demand. In August, Beijing increased surveillance of the hog/pork market in an attempt to stabilize prices and domestic production. While pork prices are falling, Chinese consumers are spending a lot more on vegetables after fall flooding wiped out crops. The price of some vegetables is now higher than pork.
Tai to be at National Chicken Council meeting... U.S. Trade Representative Katherine Tai will be at the National Chicken Council Annual Conference in Washington. There are no indications on what she may discuss, but Tai’s recent appearances have focused on touting the Biden administration’s worker-centered trade policy and taking on actions by countries that are non-market economies, a reference typically viewed as addressing actions by China without specifying Beijing as the target.
Cash cattle trade pushes higher... This week’s cash trade started at $1 to $2 higher prices in the Southern Plains and $2 to $4 higher in the northern market on Wednesday. The firmer cash trade supported live cattle futures, which modestly extended Tuesday’s strong upside push to the highest level since early September. But futures eased from their session highs yesterday, suggesting a pause or even a corrective pullback may be seen late this week.
Pork movement surges... The pork cutout value was another 26 cents lower on Wednesday, though the 451.12 loads of product that changed hands at the slightly lower price was more noteworthy. That’s the first indication the wholesale pork market may have found a price that’s “cheap enough.” But packers must be able to move a lot of product at higher prices to signal a bottom.
Overnight demand news... Saudi Arabia tendered to buy 655,000 MT of optional origin hard wheat. Pakistan cancelled a tender to buy 90,000 MT of optional origin wheat and issued another tender for the same amount.
Today’s reports
- 7:30 a.m. Weekly Export Sales — FAS
- 2:00 p.m. Egg Products — NASS
